A New Class of Investment for a New E&P GameMatt Fox – EVP, Exploration & Production
NAPE Convention – Aug. 22, 2012
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Cautionary StatementThe following presentation includes forward‐looking statements. These statements relate to future events, such as anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. Actual outcomes and results may differ materially from what is expressed or forecast in such forward‐looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict such as oil and gas prices; operational hazards and drilling risks; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects; unsuccessful exploratory activities; unexpected cost increases or technical difficulties in constructing, maintaining or modifying company facilities; international monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations or from pending or future litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; general domestic and international economic and political conditions, as well as changes in tax, environmental and other laws applicable to ConocoPhillips’ business and other economic, business, competitive and/or regulatory factors affecting ConocoPhillips’ business generally as set forth in ConocoPhillips’ filings with the Securities and Exchange Commission (SEC).
Use of non‐GAAP financial information ‐ This presentation includes non‐GAAP financial measures, which are included to help facilitate comparison of company operating performance across periods and with peer companies. A reconciliation of these non‐GAAP measures to the nearest corresponding GAAP measure is included in the appendix.
Cautionary Note to U.S. Investors – The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves. We use the term "resource" in this presentation that the SEC’s guidelines prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10‐K and other reports and filings with the SEC. Copies are available from the SEC and from the ConocoPhillips website.
The New E&P Game
Source: U.S. Department of Energy, EIA 3
Abundant unconventional reservoir playsHigh price volatility and uncertaintyStrong, ambitious National Oil CompaniesIntensified competition for portfolio, people and partners
What it Takes to Win in New E&P Game
Being a company of choice
A high‐quality, diverse portfolio
Strong technical capabilities
Financial discipline and flexibility
A clear and distinctive value proposition for shareholders
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Being a Company of Choice
High‐Quality, Diverse Portfolio
Strong Technical Capabilities
Financial Discipline and Flexibility
Distinctive Value Proposition for Shareholders
ConocoPhillips Now Repositioned to Win
Divested non‐core assets
Spun‐off Phillips 66
Built unconventional and deepwater portfolios
New management and culture
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The New ConocoPhillips
Largest North American‐based independent
Lower‐risk, diversified international positions
“Majors” asset base with compelling growth
Existing assets drive 5+ years of low‐risk growth
Proved reserves and identified resources drive medium‐term growth
Prospect inventory and technical capabilities drive longer‐term growth
Ability to execute and operate globally
Financial capability to fund growth
Commitment to shareholders
6Natural gas production and resources targeted towards liquefied natural gas depicted as “LNG”
Liquids
LNG + International Gas
North American Gas
Production – 1.54 MMBOED (2Q12)
OECD
Non OECD
Proved Reserves – 8.4 BBOE (YE 2011)
Liquids
LNG
Gas
Resources – 43 BBOE (YE 2011)
Low‐Risk International Position
Majority of production in long‐lived assets in OECD countries
4 – 6% production CAGR expected from high‐return major projects
7International excludes Canada; * 2012 full‐year impact of disposition candidatesIndependents: APA, APC, BG, MRO, OXY; integrateds: BP, CVX, RDS, TOT, XOM
Production – MBOED YE 2011 Proved Reserves – BBOE
International Global
Impactful North American Position
Largest independent producer in North America
3 – 5% production CAGR projected from high‐return program
8Source: Evaluate Energy
2012 – 2016 Production – MBOED2011 Production – MBOED
U.S. & Canada U.S. & Canada
Massive Land Position in North America
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Barnett
PanhandleSan Juan
Rockies
Asset Areas
Fee Minerals
Williston
COP Acreage*
21 MM net acres for organic growth in prolific, liquids‐rich plays
Total Lower 48: 15.3 MM Net AcresWestern Canada: 5.9 MM Net Acres
Permian
Eagle Ford
Bakken
As of August 2012
Eagle Ford – Best Position in Best Play
228 M net acres in liquids‐rich play (77% liquids) with 1.8 BBOE resources2012 program: over 180 wells with 16 rigs; $2.5 B investment; 50%+ return 1
Wells lead industry performance with $37/BBL breakeven WTI2
101 Project returns use internal forecast numbers. Price assumptions vary depending on project startup. 2 Source: ITG IR (Ross Smith Energy Group), September 2011
COP Acreage
Production – MBOED
Permian – Emerging Liquids Growth
1.1 MM net acres in liquids‐rich play (60% liquids) with 1.1 BBOE resources2012 program: over 300 wells; $0.6 B investment; 40%+ return1
Exposure in every play; over 7,000 gross identified well locationsPromising early results in Avalon and Wolfcamp plays
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Avalon
Wolfcamp
Bone Spring
25 miles
Depth
COP Acreage
1 Project returns use internal forecast numbers. Price assumptions vary depending on project startup.
Production – MBOED
Bakken – Legacy Oil in Heart of Trend
207 M net lease / 419 M net mineral acres in oil play with 0.4 BBOE resources1
2012 program: over 120 wells; $0.6 B investment; 25%+ return 2
Managed pace based on access to service and infrastructure Drilling inventory of 1,300 gross proved and probable locations
121 Net risked resources assigned to ~40% of acreage 2 Project returns use internal forecast numbers. Price assumptions vary depending on project startup.
COP AcreageOil
Production – MBOED
Exploitation
Base
2012 – 2016 Production Growth
Disciplined allocation of ~$15 B annual capex generates 3 – 5% CAGR with high margins and low risk
13* 2012 full‐year impact of disposition candidates
Near‐term Growth and Margin Improvement
Five high‐margin projects will account for 550+ MBOED by 2016
Lower‐risk geographies and geologies; diversified plays
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Production and Margin Growth2012 to 2016
2016 Cash Margin – $/BOE
L48 Liquids Fields
Disposition Candidates
Oil Sands
North American Gas Fields
Europe
Asia Pacific
Prod
uction
Growth –MBO
ED
Based on July 23 forward prices
Canada SAGD
~80 MBOED
US L48 unconventional ~210 MBOED
Australia Pacific LNG ~100 MBOED
Malaysia deepwater ~80 MBOED
North Sea conventional ~90 MBOED
Major projects Exploitation
Future Growth from Unconventional Exploration
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North America: Accessing and testing many high‐quality, high‐value, liquids‐rich plays
Added 600,000 net acres in North America since December 2010
Material working interest in liquids‐rich opportunities
Numerous shale pilots in 2012
Niobrara, Wolfcamp, Avalon, Duvernay and others
Additional seismic and appraisal drilling in others
International: Shale plays offer low‐cost entry for large acreage positions
Australia: Frontier shale play with significant potential, first phase of drilling program commenced
Poland: Exercised call option for 500,000‐acre position in Western Baltic Basin, continuing pilot program in 2012
Other: Pursuing promising shale opportunities
Horn River
Montney
Bakken
Avalon
Eagle Ford
Barnett
Niobrara
Wolfcamp
Duvernay
Canol
Western Australia
Canning Basin Acreage
Future Growth from Conventional Deepwater Exploration
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North America: 6th largest deepwater Gulf of Mexico lease owner
1.5 MM‐acre position
Currently participating in 3 wells: Coronado and Bioko wildcats, and Shenandoah appraisal
Expect to participate in 5 – 8 wells in 2013 – 2014
International: Early mover position in material basins
Angola Blocks 36/37
2.6 MM net acres, 30% WI and operator
Recent discoveries confirm exploration potential
3D seismic in 2012, drilling in late 2013
Bangladesh blocks 10 and 11
1.4 MM net acres, 100% operated WI
PSC signed Q2 2011
Completed seismic Q1 2012
COP leases
36
37
Angola
Luanda
Cameia
Shenandoah
CoronadoBioko
Lower Tertiary Play
Tiber
Strong Technology CapabilityAdvanced technologies focused on value creation
Unconventionals
Deepwater
LNG
Oil Sands
Arctic
Research and Development spans oil and gas life cycle
Advanced seismic capabilities
Field optimization, well construction & completions
Proprietary Cascade® LNG technology
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Seismic
Unconventionals
LNG Technology
Disciplined Investment Approach
75‐80% of CFO allocated to capex for growth and returns
50% to base and exploitation; 50% to major projects and exploration
Sustainable production growth
100%+ organic reserve replacement
Build inventory of future investment options
20‐25% of CFO allocated to shareholder distributions
Shareholder distributions enforce capital discipline
Predictable component of annual TSR
Targeting annual dividend growth
Strong balance sheet provides flexibility
Allows consistent investment through price cycles
Maintain “A” credit rating
Target debt‐to‐capital <30%
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1.1%
1.3%
2.4%
4.6%
.5%
.8%
2.6%
3.2%
4.5%
4.9%
5.5%
Current Dividend Yield
COP
IndependentsIntegrateds
Share price as of August 20, 2012 and most recently announced dividend annualizedIndependents: APA, APC, BG, DVN, OXY; Integrateds: BP, CVX, RDS, TOT, XOM
Our Value Proposition
Sector‐leading distributions
3 – 5% annual production growth
3 – 5% annual margins growth
Ongoing priority to improve returns
Relentless focus on safety and execution
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A New Class of Investment for a New E&P Game
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A high quality, diverse portfolio
Strong technical capabilities and compelling culture
Capital discipline and financial strength
A clear and distinctive value proposition for shareholders
Questions and Answers